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The Labor Ministry’s campaign against illegal foreign workers has led to the closure of several “cover-up” shops run by expats in the name of their Saudi sponsors.
According to one report, cover-up business in the Kingdom is estimated at more than SR 230 billion.
Many shops in different parts of the Kingdom, including Jeddah, Riyadh, Dammam, Makkah and Madinah have been found closed with “For Sale” boards hanging on them, as they could not correct the status of workers.
“About 30 percent of expats engage in cover-up businesses,” said Abdul Aziz Dayyab, supervisor of Prince Mishaal bin Majed Chair for Cover-up Business (tasattur) Issues at King Abdulaziz University in Jeddah. He estimated the total value of tasattur business in the Kingdom at SR 237 billion or 17 percent of the gross domestic product.
“Expatriates dominate over 97.5 percent of retail and wholesale market,” he added.
The Labor Ministry intends to target the retail market to create 600,000 jobs for citizens.
Economic experts have proposed the setting up of holding companies across the country to handle big markets as part of efforts to counter illegal business.
“The retail market situation has reached a dangerous stage,” one economist said blaming weak laws and monitoring regime for creating the mess over the past three decades.
Salim Bajaja of Taif University said the cover-up business would have a negative impact on the economy, adding that it would promote trade fraud and unfair competition.
It will also increase annual foreign transfers of expats estimated at SR 140 billion.
Expat traders have requested authorities to legalize their business by allowing them to conclude agreements with Saudi partners.
“This will boost Saudi business sector and encourage more foreigners to invest in the sector,” said Usman Irumpuzhi, a journalist, adding some GCC countries allow such trade.
In the UAE, foreigners can create partnerships between themselves without the need to have Emirati sponsors on condition that they must finance their projects through minimum of $2.7 million capital inflows.